With more information than ever being passed up to the boardroom, chief financial officers are looking to exploit the power of big data
Big data is a catch-all term but, broadly speaking, it refers to the large volume of internal and external data that can now be captured and analysed to improve organisational and financial performance. Chief financial officers (CFOs) in UK businesses now have more data at their fingertips than ever before, and their role is changing as a result.
Simon Bittlestone, chief executive of financial analytics firm Metapraxis, harks back 20 years to demonstrate how the role of the CFO has been affected by the advent of big data. “You found more CFOs focusing most of their time on ensuring the numbers for business reporting were correct, and ensuring the business was liquid and the risks were being managed. And that’s still an important part of the role of CFO,” says Mr Bittlestone, who explains that following the automation of financial reporting, the focus became how can we improve the business using the data we have?
Having access to data from across the business is one thing, but knowing what to do with it brings another set of challenges, which many CFOs are rising to. Big data analytics provide an impartial, statistically accurate view across the whole business, which helps CFOs make more evidence-based decisions, according to Renaud Heyd, CFO at SAP UK and Ireland. He adds: “Big data enhances the finance function’s ability to steer, control and develop the business.”
Raymon van Viegen, CFO at Onguard, points to an example of a large business which has successfully used big data to implement cost-saving initiatives. “This is something we have seen from [shipping and logistics company] UPS, which used the wealth of data at its disposal to uncover that it could significantly reduce costs if drivers took fewer left turns,” Mr van Viegen explains. “As a result of this finding, the courier saved 38 million litres of fuel [in 2011] and the price tag attached to that.”
Big data can be used for much more than cost-cutting in a business. Airswift CFO Tim Briant says one of the areas where data has been driving commercial decisions in his workforce solutions company is in hiring. “In recruitment, the additional analytics from LinkedIn around the recruitment trends in a region, by skillset and organisation, are really allowing us to provide insight to our customers,” he says, adding this enables the business to assess how long it will take to fill roles and what it should charge for its services.
Wide array of data
Peter Simons, associate technical director of research and development, management accounting, at the Association of International Certified Professional Accountants (AICPA), notes that CFOs play a central role in continually ensuring resources within a business are allocated or reallocated to where the returns or prospects are best.
“To make these decisions, CFOs should of course have relevant financial information at their fingertips, but they should now also have on hand the salient data about the key drivers of financial outcomes,” he says. This type of information should be coming to them from teams across the business.
A recent survey by Exasol of 500 decision-makers in enterprise organisations in the UK and Germany found the most frequently requested data insights by business units in an organisation were financial outlooks (57 per cent) and product performance metrics (50 per cent), followed by customer feedback analysis and market trends at 46 per cent and 41 per cent respectively.
David Walters, head of data at business intelligence specialist Creditsafe, says CFOs might be expected to handle financial data in terms of how that can drive value outside the finance function, including in procurement, and sales and marketing. “They might also be expected to examine supply chain-focused data and information technology,” he adds.
This has changed perceptions about who owns the data in an organisation. Rather than sitting in silos, data sets from across finance, marketing and customer service can be combined to create a bigger picture for use in predicting customer behaviours and patterns.
In this case, Mr Simons believes the CFO is the broker of information within the business. “CFOs should have a quantitative, evidence-based understanding of the business model and how it creates value for its stakeholders. This includes everything from the targeted market segment and value proposition through to external resources and relationships, as well as internal processes and skills needed to deliver the tangible and intangible benefits expected by customers,” he says.
There is now also an expectation on CFOs to look beyond what might be deemed traditional sources of data, as Tim Vine, head of European trade credit at Dun & Bradstreet, points out. “Real-time information is often published online before reaching official sources,” he says. “For example, 24-hour news sites might be the first ones to share exclusive developments on businesses, which might impact their risk assessment or the wider supply chain. It’s these non-traditional data sources that can provide CFOs with automated, contextual insight from a variety of sources, which is an exciting opportunity.”
Get it right and data will ensure the finance director continues to hold a critical strategic position at the heart of the business
Businesses have always made predictions, particularly when it comes to financial performance. But thanks to big data and the use of predictive analytics, CFOs have the opportunity to ensure those predictions are even more accurate, cementing the finance team’s strategic value within a business.
Mr Walters explains: “Predictive analytics is a form of advanced analytics used to make predictions about unknown future events. It incorporates many techniques, from statistics to machine-learning and artificial intelligence (AI). “Organisations can use this technique to become more proactive and forward thinking by anticipating outcomes and behaviours using measurable data, rather than just hunches or assumptions.”
While this predictive analytics is not new, many companies are still unsure about how to use it. Mr Bittlestone thinks it is not complicated and points out there is a wealth of information available on how to approach business performance management with predictive and prescriptive analytics. “I don’t think the barrier is going to be the knowledge of how to do it. It’s either a case of not feeling it’s important, which is going to be a real miss in the next few years, or it’s a case of not knowing how to approach it,” he says.
But what other new techniques are CFOs embracing as part of the changing nature of their role? Mr Simons draws on research conducted by AICPA for its recent Agile Finance Unleashed report, published in partnership with Oracle, which shows that 21 per cent of finance leaders have already deployed data visualisation within their organisation. “Yet, it also found that the use of more advanced techniques such as AI (11 per cent), machine-learning (14 per cent) and neuro-linguistic programming (13 per cent) are still in the early adoption stage,” he adds.
Another trend observed by Mr Vine is companies wanting to integrate data and analytics into their customer relationship management and enterprise resource planning systems.
Ultimately, there is a lot riding on CFOs’ ability to crunch the data. “Get it right and data will ensure the finance director continues to hold a critical strategic position at the heart of the business,” Mr Vine concludes.
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